Employment policies and data

Boosting jobs and incomes - lessons from reassessing the OECD Jobs Strategy


by Angel Gurría, Secretary-General of the OECD
An address to the meeting of G8 Employment and Labour Ministers
Moscow, 9-10 October 2006

In 1994, OECD countries endorsed the Jobs Strategy which consisted of a set of ten policy guidelines to cut high unemployment. This proved to be an extremely influential blueprint in the policy debate and the reform process. It also yielded concrete results: unemployment has fallen and employment has risen in most OECD countries since 1994. (see Brochure)

Following a request from Ministers, we have reassessed the Jobs Strategy  recently in light of what we have learnt and considering the new challenges facing us: 

  • For one thing, while mass unemployment was the key issue 10 years ago, the challenge is now to expand employment and incomes. Of course, high and persistent unemployment is still an important unfinished task, especially in the large European countries.  But population ageing means that increasing employment has now become a key priority for all G8 countries. Let me give you one figure: today, there are four active people for each retired one in the OECD; this is projected to fall to around two to each retiree in 2050.
  • At the same time, some 35% of the OECD working-age population (i.e. 265 million people in 2005) do not have a job. And the bulk of them (almost 230 million) are not unemployed. They mainly consist of students, women, early retirees and the disabled.
  • The task of promoting employment is also made more urgent in light of globalisation and rapid technological change. The key challenge here is to ensure that people and firms are able to adjust quickly to change, the more so as adjustment pressures will intensify in the future when countries with large labor forces such as China and India, become more integrated in the world economy. 
  • In short, what is needed today is more and better-paid jobs.

The restated Jobs Strategy seeks to respond directly to this policy imperative.  It was released to the press in mid-June and presented to Ministers at a High-Level Policy Forum in Toronto, hosted by Minister Finlay. I want to thank her for her hospitality.

The restated Job Strategy rests on 4 main pillars which deal with both job creation and job demand:

  • Set appropriate macroeconomic policies
  • Remove impediments to labor market participation as well as job search 
  • Tackle labor and product market obstacles to labor demand
  • Facilitate the development of labor force skills and competencies. 

These pillars are analysed in detail in our Background Report for this meeting and I will not discuss them now. However, if there are detailed questions, my colleague, John Martin , would be happy to answer them.

I would like to highlight four important political messages coming out of the Reassessment.

Message 1: We know quite a lot about how to increase employment rates

Our work has shown that countries can make large cuts in unemployment and the number of social assistance recipients by implementing effective welfare-to-work strategies.  These have to be built around “mutual obligations/activation” principles between public institutions and job seekers and ensure that getting a job yields clear financial gains to the job-seeker and his/her family compared with remaining on benefits.

Older workers
Again we have evidence of what works from our reviews of over 20 OECD countries.  But there is still a large unfinished agenda in terms of eliminating incentives to early retirement in both public and private pension systems. We also need to convince older and mid career workers and employers of the economic, social and even health benefits of working longer.

Female employment rates have increased in many countries, but more can be done.  We know that a combination of tax reform and access to quality, affordable childcare can play a big role here.  But both, the government and the private sector need to invest more in family-friendly policies and to foster a more equal sharing of parental responsibilities between men and women. 

We know it is essential for young people to avoid been labelled a school failure.  Early intervention, in the pre-schooling period, and sustaining this intervention during compulsory schooling is effective.  Dual systems, combining education with workplace training, have been shown to be successful at promoting youth employment.  And a new OECD review on the school-to-work transition, in which 5 of the G8 countries are participating, will add to our knowledge of good practices.

But there is a looming challenge as we seek to assist other inactive groups to find work.  For example, it is a very sobering fact that there were roughly 42 million people of working age in the OECD in 2005 relying on long-term sickness/disability benefits compared with just over 36 million unemployed. 

Our challenge, your challenge, is how to adapt a “mutual obligations/activation” strategy to help many of these people get a job.  The OECD has just launched a review covering 12 countries which seeks to establish what combinations of preventive actions, mutual obligations, rehabilitation and changes in workplace practices can help the disabled who want to work.  We know that many would like to do so, if given the chance.

Message 2:  Ensure that workers have the right skills

I cannot overemphasize the contribution that lifelong learning can make to economic growth, while also reducing poverty and mitigating inequality. Obviously, the foundations of lifelong learning lie in effective schooling systems and our well-known PISA survey is providing fascinating insights into good and bad practices in our schools. But learning has to continue through working life. Access to training is distributed very unequally over the adult workforce in all countries: those people with the least education and skills participate much less in training.

What can be done?

  • Ensure that the training market works well via greater transparency and portability of formal and informal skills, and greater competitive pressures on training providers.  The OECD is working to develop “a PISA for adults” – the Programme for the International Assessment of Adult Competences (PIAAC) -- which would assist greatly in this task.
  • Public subsidies for training have been found to be more efficient when they are matched with a contribution from the recipient individual or firm, i.e., when there is co-financing of training. 
  • Evidence shows that time constraints prevent many workers from getting all the training they need. In these cases, well-designed training leave measures can help, especially for disadvantaged groups.
  • The active involvement of social partners in designing and implementing lifelong learning policies can help make the programmes to be successful.

Message 3: Different Policy Packages can deliver good labour market performance:  there is no single road to Rome or Moscow! (Brochure)

The policy recommendations of the restated Jobs Strategy should adapt to national circumstances and social preferences: 

  • Several successful countries combine low levels of welfare benefits, low taxes and light employment regulations. The US is a case in point.
  • Other successful countries, like Denmark and the Netherlands, offer generous welfare benefits but “activate” jobseekers in various ways.  They often place a strong emphasis on coordinated collective bargaining and social dialogue.  These countries have achieved high employment and low income inequality, though at a higher budgetary cost.

But this is not to say that everything goes! A common feature of the two successful packages is an emphasis on strong competition and very open and free product markets as well as macroeconomic stability. But to be successful, a package needs to be coherent and embody a good overall incentive structure.  Implementation is also key.

Message 4: Political will is needed to stay the course

You may nod your heads at this and say: all this is well and good but how can I introduce such reforms and still get re-elected?  There will often be strong resistance to introducing some of the recommended policies.  But implementation problems should not serve as an excuse for inaction. The successes achieved by some countries over the past decade show what can be achieved if there is sufficient political will to reform. Take the example of Spain where ambitious product market reforms have been pursued.  Twelve years ago, the unemployment rate was more than 20%. It is now down to under 8%, below that of France and Germany for the first time ever!

I strongly believe that countries that take action along the lines recommended under the restated OECD Jobs Strategy will be rewarded by a stronger labour market and, most importantly, improved living standards.

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